In the latest development following the talks with the IMF, the government is considering imposing a tax on agricultural income in line with the fund’s requirement. While no conclusion between the two have been reached until the time of writing with regard to the revival of the $6 billion IMF programme, officials of the global lender have put forth a list of demands during the recently held meetings in Washington. These include withdrawing sales tax starting from November and taxing farm income.
The Federal Board of Revenue (FBR) projects that bringing the agricultural sector into the federal tax net would add at least Rs 120 billion to the annual income during the first few years of implementation. However, the implementation will not be a smooth sailing for the government. For one, the collection of agriculture tax is a provincial matter according to the Constitution. Whether provincial governments will be open to the passage of the 4th Tax Laws Amendment Ordinance, as proposed by the FBR since it would not require amending the Constitution, is too early to predict. The ruling PTI has already bulldozed a number of ordinances through legislation that have caught the ire of the opposition. And with an increasing inflation in the country, the revival of the IMF programme will only add to the woes of the people, who the opposition parties have been campaigning to protect. It is then likely that the ordinance may be strongly opposed.
But most importantly, taxing farm income isn’t in line with Prime Minister Imran Khan’s policy to provide relief for farmers. After launching the Kisan Card to provide various subsidy packages to farmers, the premier launched the Kisan Portal last week to give voice to the ‘voiceless’ against those in power. It is an open secret that influential landlords get away by giving minimum income to farmers working for them. In this backdrop, if tax on agriculture income is introduced, there are high chances that it will be the ‘voiceless’ who will have to face the brunt of the new change. It must be noted that provincial governments shied away from collecting taxes from landlords due to their influence. Thus, taxing the farm income can lead to further exploitation of small-scale farmers. This is not to say that the sector must not be taxed but a plan to find solutions from the grassroot level must be devised first. A good start would be to first catch big landlords, who have been evading taxes for years.
